Pacific & Western Credit Corp. announces results for its first quarter ended January 31, 2008



    LONDON, ON, Feb. 28 /CNW/ -

    
    FIRST QUARTER HIGHLIGHTS

    (three months ended January 31, 2008, compared to three months ended
     January 31, 2007, unless otherwise noted)

    -   Total assets increased to $1.49 billion from $1.36 billion a year
        ago.
    -   Total loans increased to $976 million from $895 million a year ago.
    -   Credit quality remained strong with gross impaired loans to total
        assets of 0.09% compared to 0.19% a year ago.
    -   Spread (teb) for the quarter improved to 1.36% from 1.33% for the
        previous quarter and compared to 1.45% for the same period a year
        ago.
    -   Net interest income (teb) improved to $5.0 million from $4.5 million
        for the previous quarter and from $4.9 million a year ago.
    -   Net income for the quarter was $536,000 or $0.03 per share
        ($0.03 diluted) compared to $1.1 million or $0.08 per share
        ($0.07 diluted) for the same period last year, which included a pre-
        tax gain of approximately $888,000 related to the disposition of
        shares of Discovery Air Inc.
    

    PRESIDENT'S COMMENTS

    Net income for the first quarter totalled $536,000 or $0.03 per share
($0.03 diluted) with net interest income (teb) increasing to $5 million from
$4.5 million for the previous quarter and spread (teb) improving to 1.36% from
1.33% for the last quarter. The increase in net interest income and spread
were a result of an increase in average loans for the quarter, growing from
$951 million to $977 million, and an increase in spreads primarily in our
securities portfolio. Loans funded during the quarter totalled $46 million but
were offset by repayments totalling $48 million. Credit quality continues to
be strong with gross impaired loans as a percentage of total assets of 0.09%,
a result of our continuing focus on low risk lending and investing
opportunities.
    We continue our discussions with potential partners for our Visa card
program and our Versabanq software initiative and remain confident that these
initiatives, alongside continued growth in our lending portfolios and overall
improved spreads, will lead to increasing profitability in the future.


    
    FINANCIAL HIGHLIGHTS

    (unaudited)                              for the three months ended
    -------------------------------------------------------------------------
    ($ thousands, except per            January 31   October 31   January 31
     share amounts)                        2008         2007         2007
    -------------------------------------------------------------------------

    Results of operations (teb)
      Net interest income per
       financial statements            $     4,212  $     3,777  $     4,462
      Teb adjustment                           832          715          444
      Net interest income                    5,044        4,492        4,906
      Spread                                  1.36%        1.33%        1.45%
      Provision for credit losses                8          198          429
      Net interest income after
       provision for credit losses           5,036        4,294        4,477
      Other income (charges)                   (86)         114          959
      Total revenue                          4,950        4,408        5,436
      Non-interest expenses                  3,781        3,049        3,658
      Net income                               536          638        1,091
      Earnings per common share:
        Basic                          $      0.03  $      0.04  $      0.08
        Diluted                        $      0.03  $      0.04  $      0.07
      Efficiency ratio                 $      0.76  $      0.66  $      0.62
      Return on average common
       shareholders' equity                   3.71%        4.13%        6.36%
      Return on average total assets          0.14%        0.19%        0.32%
      Gross impaired loans to
       total assets                           0.09%        0.10%        0.19%
      Provision for credit losses as
       a % of average loans                   0.00%        0.02%        0.05%
      Number of full time equivalent
       staff                                    60           57           65
    -------------------------------------------------------------------------

    Balance Sheet Summary
      Cash and securities              $   478,175  $   441,727  $   414,315
      Total loans                          975,558      977,727      895,158
      Average loans                        976,643      950,556      879,494
      Total assets                       1,490,682    1,458,656    1,358,729
      Average assets                     1,474,669    1,342,120    1,344,229
      Deposits                           1,363,050    1,282,756    1,174,237
      Notes payable                         40,732       35,660       35,456
      Shareholders' equity                  51,712       57,054       65,087
    -------------------------------------------------------------------------

    Capital ratios
    (Based on the subsidiary Pacific
     & Western Bank of Canada)
      Total regulatory capital         $    93,630  $    91,820  $    98,244
      Risk weighted assets                 810,767      800,582      797,169
      Assets-to-capital ratio                16.26        16.19        13.95
      Tier 1 risk-based capital ratio         7.85%        7.72%        8.10%
      Total risk-based capital ratio         11.55%       11.47%       12.32%
    -------------------------------------------------------------------------
    

    Non-GAAP measures:

    Like most banks, Pacific & Western Credit Corp. (the "Corporation")
analyzes revenue on a taxable equivalent basis (teb) to permit uniform
measurement and comparison of net interest income. Net interest income
includes tax-exempt income on certain securities. Since this income is not
taxable, the rate of interest or dividends received is lower than would apply
to a loan or taxable security of the same amount. The taxable equivalent basis
includes an adjustment that increases interest income and the provision for
income taxes by the same amount that adjusts the income on the tax-exempt
securities to what income would have been had it been taxed at the statutory
rate.

    MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL
    CONDITION

    This management's discussion and analysis (MD&A) of operations and
financial condition for the first quarter of fiscal 2008 should be read in
conjunction with the unaudited interim consolidated financial statements for
the period ended January 31, 2008, included herein, and the audited
consolidated financial statements and MD&A for the year ended October 31,
2007, which are available on SEDAR at www.sedar.com. Except as discussed
below, all other factors discussed and referred to in the MD&A for the year
ended October 31, 2007, remain substantially unchanged.

    Overview

    Net income for the quarter was $536,000 or $0.03 per share
($0.03 diluted) compared to $1.1 million or $0.08 per share ($0.07 diluted)
for the same period a year ago with the change due primarily to a decrease in
other income earned in the current period. Other income for the same period a
year ago included a gain of $888,000 resulting from the disposition of shares
of Discovery Air Inc. (DA). There was no similar gain earned in the period
ended January 31, 2008.
    Net interest income (teb) for the quarter was $5.0 million compared to
$4.5 million for the previous quarter and $4.9 million for the same period a
year ago. Net interest income increased from the previous quarter primarily
due to an improvement in spreads earned during the quarter in our securities
portfolio. As a result of the liquidity crisis, the Corporation is seeing
spreads widen in both its securities and in new lending. Furthermore, the
Corporation has maintained its focus on low risk lending and investing
opportunities and does not have any direct exposure to the North American
subprime lending market or to asset backed commercial paper.
    At January 31, 2008, total assets increased to $1.49 billion from
$1.36 billion a year ago. The largest increase was in lending assets which
grew to $976 million at the end of the quarter from $895 million a year ago.
Credit quality remains strong with gross impaired loans at the end of the
quarter of only $1.4 million or 0.09% of total assets compared to $2.5 million
or 0.19% of total assets a year ago. As well, the provision for credit losses
as a percentage of average loans for the quarter was virtually nil compared to
0.05% for the previous year.

    Total Revenue (teb)

    Total revenue (teb), which is comprised of net interest income after
provision for credit losses and other income (charges), was $5.0 million for
the quarter compared to $5.4 million a year ago.

    Net Interest Income

    Net interest income (teb) was $5.0 million for the quarter compared to
$4.5 million for the previous quarter and $4.9 million a year ago. Net
interest margin or spread (teb), which is net interest income as a percentage
of average assets, was 1.36% for the quarter compared to 1.33% for the
previous quarter and 1.45% a year ago. The increase from the previous quarter
was primarily due to improved spreads in our securities portfolio as a result
of the liquidity crisis.

    Other Income

    Other income (charges) for the quarter was ($86,000) compared to $959,000
for the same period a year ago with the decrease resulting from a gain of
$888,000 recorded last year when DA shares were disposed of. In addition,
during the current quarter, the Corporation recorded charges totalling
$197,000 relating to mark-to-market adjustments on interest rate swaps. These
charges were partially offset by administrative fee income of $124,000 earned
from DA.

    Non-Interest Expenses

    Non-interest expenses for the quarter were $3.8 million compared to
$3.1 million for the previous quarter and $3.7 million a year ago.
Non-interest expenses were lower in the previous quarter as a result of a
reduction in the accrual for staff incentive awards when actual results were
less than targeted. The increase in this quarter was also a result of an
expense of $263,000 being recorded for employee stock options compared to
$153,000 a year ago. In addition, during the current quarter, the Corporation
incurred approximately $90,000 in expenses related to its Versabanq
Innovations Inc. subsidiary, expenses which had not been incurred during the
same quarter last year.

    Income Taxes

    For the current quarter the Corporation's statutory federal and
provincial income tax rate was approximately 34% compared to 36% in 2007 with
the difference being due to a rate reduction which was substantively enacted
during the current quarter. However, the effective rate was reduced by
non-taxable income earned on preferred shares in our securities portfolio and
impacted by expenses such as stock-based compensation which are not deductible
for income tax purposes. These items resulted in an income tax recovery of
$199,000 being recorded in the quarter.

    Balance Sheet

    Total assets at January 31, 2008, were $1.49 billion compared to
$1.36 billion a year ago with the increase being primarily a result of the
increase in lending assets which grew by 9%.

    Cash and Securities

    Cash and securities, which are held for liquidity management purposes and
to earn investment income, were $478 million compared to $414 million a year
ago. Securities consist of government bonds and investment grade corporate
debt and preferred shares. Corporate preferred shares are held for the
preferential tax treatment their dividends receive. As indicated previously,
the Corporation does not own any asset backed commercial paper and therefore
is not exposed to any direct losses from this type of security as a result of
recent market instabilities.
    At January 31, 2008, the net unrealized loss in our securities portfolio
was $15.5 million compared to a net unrealized loss of $326,000 a year ago
which is recorded after income taxes in accumulated other comprehensive income
(loss). The decrease from the previous year is primarily related to the
Corporation's holdings of corporate preferred shares and is a result of
changes in market interest rates and the impact of the market's increases in
the pricing for credit risk in securities as a result of the liquidity crisis.
Since the Corporation has the ability and intent to hold these securities
until there is a recovery of fair value, these unrealized losses are
considered temporary in nature.

    Mortgages and Loans

    Lending assets grew to $976 million at the end of the quarter from
$895 million a year ago. Loan categories which saw increases from a year ago
were primarily in loans to public sector entities and in insured residential
mortgages. As noted previously, at January 31, 2008, the Corporation does not
have any exposure to the subprime lending market and therefore is not exposed
to any direct losses from this sector.
    New lending in the quarter totalled $45.9 million offset by $48.1 million
in repayments. The outlook for new loan funding continues to be promising with
total loans committed to at January 31, 2008 exceeding $453 million.

    Other Assets

    Other assets totalled $36.9 million at the end of the quarter compared to
$39.2 million at the end of the previous quarter and $49.3 million a year ago.
Included in other assets is the Corporation's investment in DA which is
accounted for as an available-for-sale asset and carried at market value. The
decrease in other assets from a year ago was due primarily to the disposition
of DA shares as a special dividend valued at $10.8 million as well as a
decrease of $6.8 million from a year ago in the market value of the DA
investment. At January 31, 2008, the investment in DA had an unrealized loss
of $1.7 million which is recorded after income taxes in accumulated other
comprehensive income (loss).

    Deposits and Financing

    Deposits are used as a primary source of financing growth in assets and
are raised entirely through an agent network across Canada. Deposits at the
end of the quarter were $1.36 billion compared to $1.17 billion a year ago.
Our deposits consist primarily of fixed term guaranteed investment
certificates and a nominal amount of demand deposits.
    A second source of financing growth in assets is the use of margin lines
and securities sold under repurchase agreements. From time to time, the
Corporation uses these sources of financing when the cost of borrowing is less
than the interest rates that would have to be paid on new deposits. At the end
of the quarter, the Corporation did not have any amounts outstanding related
to securities sold under repurchase agreements compared to $60 million a year
ago.
    Notes payable at January 31, 2008, were $40.7 million compared to
$35.7 million at the end of the previous quarter and $35.5 million a year ago.
The increase was a result of notes totalling $5.0 million being issued in the
quarter with the proceeds invested in common shares of its subsidiary Pacific
& Western Bank of Canada. Notes payable, including the new notes, bear
interest at rates ranging from 9.0% to 9.25% per annum.

    Credit Quality

    Gross impaired loans at the end of the quarter totalled $1.4 million or
0.09% of total assets, compared to $2.5 million or 0.19% of total assets a
year ago. The provision for credit losses for the quarter was $8,000 compared
to $429,000 a year ago. Total allowances for credit losses, including specific
and general allowances, were $3.2 million at the end of the quarter compared
to $3.0 million a year ago. The provision for credit losses as a percentage of
average loans for the quarter was virtually nil compared to 0.05% a year ago.

    Shareholders' Equity

    At the end of the quarter, shareholders' equity was $51.7 million
compared to $65.1 million a year ago with the decrease due primarily to the
special dividend of $10.8 million declared and distributed in the previous
year, shares repurchased and cancelled under the Normal Course Issuer Bid, and
the change in accumulated other comprehensive income (loss). These decreases
were partially offset by the issue of common shares on exercise of stock
options and the retention of earnings. Total common shares outstanding at the
end of the quarter were 13,604,652 compared to 13,685,552 at the end of the
previous quarter with the change due to the exercise of common share options
offset by shares repurchased for cancellation. Outstanding common share
options totalled 1,298,577 at the end of the quarter compared to 1,054,345 at
the end of the previous quarter. Our book value per common share at the end of
the quarter was $3.54 compared to $3.91 at the end of the previous quarter and
$4.55 a year ago.
    On July 17, 2007, the Corporation announced that it had filed a Notice of
Intention to make a Normal Course Issuer Bid, pursuant to which the
Corporation may purchase for cancellation up to 1 million of its common
shares. The Bid will terminate on July 18, 2008. The price that the
Corporation pays for any common shares is the market price at the time of
purchase. The Corporation believes that the market price of its common shares
is unusually low and does not fully reflect the value of its business and
future business prospects. As a result, the Corporation believes that
purchasing its common shares represents an attractive investment opportunity
and an appropriate and desirable use of available funds. During the three
months ended January 31, 2008, the Corporation had repurchased for
cancellation 82,900 common shares for a total cost of $679,000. To date, the
Corporation has repurchased for cancellation 163,100 common shares for a total
cost of $1.26 million.

    Updated Share Information

    At February 27, 2008, there were 13,597,452 common shares outstanding
with the change since January 31, 2008 due to 7,200 common shares repurchased
for cancellation under the Normal Course Issuer Bid. At February 27, 2008,
there was no change in the number of common share options outstanding.

    Capital Management

    Total regulatory capital in the Corporation's principal subsidiary,
Pacific & Western Bank of Canada (the "Bank"), totalled $93.6 million at
January 31, 2008 compared to $98.2 million a year ago and $91.8 million at the
end of the previous quarter. The decrease in total regulatory capital from a
year ago was primarily a result of a dividend of $11.0 million paid last year
by the Bank to the Corporation and the change in accumulated other
comprehensive income (loss). These were partially offset by earnings retained
in the Bank and the issue of $5 million in common shares by the Bank to the
Corporation.
    The Bank's total risk-based capital ratio, which is the ratio of
regulatory capital to risk-weighted assets, was 11.55% at January 31, 2008.
The Bank has an internal target for its risk-based capital ratio of 11% and
manages its regulatory capital and risk-weighted assets so this target is
exceeded. The Bank's Tier 1 risk-based capital ratio, which is the ratio of
Tier 1 capital to risk-weighted assets, was 7.85% at the end of the quarter.
The Bank's assets-to-capital ratio was 16.26 at the end of the quarter. See
note 6 to the interim consolidated financial statements for more information
regarding capital management.

    
    Summary of Quarterly Results

    (thousands of
     dollars except
     per share
     amounts)              2008                        2007
    ------------------ ---------- -------------------------------------------
                            Q1         Q4         Q3         Q2         Q1
    Results of
     operations:
    Total interest
     income per
     financial
     statements        $  20,377  $  18,795  $  16,978  $  17,538  $  18,163
    Teb adjustment           832        715        559        492        444
    Total interest
     income               21,209     19,510     17,537     18,030     18,607
    Yield on assets (%)     5.71%      5.77%      5.37%      5.42%      5.49%
    Interest expense      16,165     15,018     13,757     13,495     13,701
    Cost of funds (%)       4.35%      4.44%      4.21%      4.06%      4.04%
    Net interest income    5,044      4,492      3,780      4,535      4,906
    Net interest
     margin (%)             1.36%      1.33%      1.16%      1.36%      1.45%
    Provision for
     credit losses             8        198        142         72        429
    Other income
     (charges)               (86)       114        260        294        959
    Total revenue          4,950      4,408      3,898      4,757      5,436
    Non-interest
     expenses              3,781      3,049      3,643      3,548      3,658
    Income before
     income taxes          1,169      1,359        255      1,209      1,778
    Income tax provision     633        721        128        865        687
    Non-controlling
     interest                  -          -          -          -          -
    Net income               536        638        127        344      1,091
    Earnings per share
      -basic           $    0.03  $    0.04  $    0.01  $    0.02  $    0.08
      -diluted         $    0.03  $    0.04  $       -  $    0.02  $    0.07


    (thousands of
     dollars except
     per share
     amounts)                         2006
    ------------------ --------------------------------
                            Q4         Q3       Q2(*)
    Results of
     operations:
    Total interest
     income per
     financial
     statements        $  18,677  $  16,418  $  15,104
    Teb adjustment           432        440        352
    Total interest
     income               19,109     16,858     15,456
    Yield on assets (%)     5.79%      5.37%      5.37%
    Interest expense      14,415     12,200     10,560
    Cost of funds (%)       4.37%      3.89%      3.67%
    Net interest income    4,694      4,658      4,896
    Net interest
     margin (%)             1.42%      1.48%      1.70%
    Provision for
     credit losses           339        321         78
    Other income
     (charges)             1,116     12,963      1,251
    Total revenue          5,471     17,300      6,069
    Non-interest
     expenses              3,252      3,215      3,104
    Income before
     income taxes          2,219     14,085      2,965
    Income tax provision     737      2,282      1,040
    Non-controlling
     interest                  -          -        117
    Net income             1,482     11,803      2,042
    Earnings per share
      -basic           $    0.11  $    0.88  $    0.15
      -diluted         $    0.10  $    0.85  $    0.14


    (*) Results for this quarter include the results of the operations for DA
        accounted for on the consolidation basis. DA was subsequently
        accounted for on the equity basis until October 31, 2006 and as an
        available-for- sale asset thereafter.
    

    Net interest income and spread (teb) for the current quarter increased
from the previous quarter primarily as a result of increased spreads in our
securities portfolio and a decrease in our cost of funds. Until the fourth
quarter of 2007, spreads decreased as a result of competitive pricing for new
loans, a compression of spreads primarily in our securities portfolio and
increased competition for new deposits which resulted in an increase in our
cost of funds.
    Other income (charges) was less in the current quarter as there were no
gains or equity earnings from DA. Non-interest expenses in the current quarter
increased from the previous quarter as a result of a reduction of the accrual
for staff incentive awards when actual results were less than target. In
addition, salaries and benefits in the current quarter increased as a result
of employee stock options granted during the quarter.

    Controls and Procedures

    During the most recent interim period, there have been no changes in the
Corporation's policies and procedures and other processes that comprise its
internal control over financial reporting, that have materially affected, or
are reasonably likely to materially affect, the Corporation's internal control
over financial reporting.

    Dated: February 27, 2008

    Forward-Looking Statements

    The statements in this management's discussion and analysis which relate
to the future are forward-looking statements. By their very nature,
forward-looking statements involve inherent risks and uncertainties, both
general and specific, and risks exist that predictions, forecasts, projections
and other forward-looking statements will not be achieved. Readers are
cautioned not to place undue reliance on these forward-looking statements as a
number of important factors could cause actual results to differ materially
from the plans, objectives, expectations, estimates and intentions expressed
in such forward-looking statements. These factors include, but are not limited
to, the strength of the Canadian economy in general and the strength of the
local economies within Canada in which we conduct operations; the effects of
changes in monetary and fiscal policy, including changes in interest rate
policies of the Bank of Canada; the effects of competition in the markets in
which we operate; inflation; capital market fluctuations; the timely
development and introduction of new products in receptive markets; the impact
of changes in the laws and regulations regulating financial services; changes
in tax laws; technological changes; unexpected judicial or regulatory
proceedings; unexpected changes in consumer spending and savings habits; and
our anticipation of and success in managing the risks implicated by the
foregoing.
    The foregoing list of important factors is not exhaustive. When relying
on forward-looking statements to make decisions, investors and others should
carefully consider the foregoing factors and other uncertainties and potential
events. There is no undertaking to update any forward-looking statement that
is contained in this management's discussion and analysis or made from time to
time by the Corporation.


    
    PACIFIC & WESTERN CREDIT CORP.
    Consolidated Balance Sheet
    (thousands of dollars)

                                      January 31    October 31    January 31
                                         2008          2007          2007
                                    ------------- ------------- -------------
                                     (unaudited)                 (unaudited)

    Assets
    Cash resources                   $   185,463   $   113,421   $   142,656
    Securities                           292,712       328,306       271,659
    Mortgages and loans                  975,558       977,727       895,158
    Other assets                          36,949        39,202        49,256
                                    ------------- ------------- -------------

                                     $ 1,490,682   $ 1,458,656   $ 1,358,729
                                    ------------- ------------- -------------
                                    ------------- ------------- -------------

    Liabilities and
     Shareholders' Equity
    Deposits                         $ 1,363,050   $ 1,282,756   $ 1,174,237
    Notes payable                         40,732        35,660        35,456
    Other liabilities                     35,188        83,186        83,949
                                    ------------- ------------- -------------
                                       1,438,970     1,401,602     1,293,642
                                    ------------- ------------- -------------

    Shareholders' equity
    Share capital                         39,077        39,470        38,282
    Retained earnings                     24,404        24,125        23,131
    Accumulated other comprehensive
     income (loss)                       (11,769)       (6,541)        3,674
                                    ------------- ------------- -------------
                                          51,712        57,054        65,087
                                    ------------- ------------- -------------

                                     $ 1,490,682   $ 1,458,656   $ 1,358,729
                                    ------------- ------------- -------------
                                    ------------- ------------- -------------



    PACIFIC & WESTERN CREDIT CORP.
    Consolidated Statement of Income
    (thousands of dollars)

                                                  for the three months ended
                                                  ---------------------------
                                                    January 31    January 31
                                                       2008          2007
                                                  ---------------------------
                                                   (unaudited)   (unaudited)

    Interest income
      Interest income on loans                     $    13,958   $    13,094
      Interest and income from securities                5,492         4,469
      Loan fee income                                      927           600
                                                  ---------------------------
                                                        20,377        18,163
    Interest expense
      Deposits and other                                15,282        12,831
      Notes payable                                        883           870
                                                  ---------------------------
                                                        16,165        13,701
                                                  ---------------------------

      Net interest income                                4,212         4,462

      Provision for credit losses                            8           429
                                                  ---------------------------

      Net interest income after provision
       for credit losses                                 4,204         4,033

      Other income (charges)                               (86)          959
                                                  ---------------------------

                                                         4,118         4,992
                                                  ---------------------------

    Non-interest expenses
      Salaries and benefits                              2,146         2,120
      General and administrative                         1,153         1,137
      Premises and equipment                               482           401
                                                  ---------------------------
                                                         3,781         3,658
                                                  ---------------------------

      Income before income taxes and other                 337         1,334

      Income tax (recovery) provision                     (199)          243
                                                  ---------------------------

    Net income                                     $       536   $     1,091
                                                  ---------------------------
                                                  ---------------------------

    Basic earnings per share                       $      0.03   $      0.08
                                                  ---------------------------
                                                  ---------------------------

    Diluted earnings per share                     $      0.03   $      0.07
                                                  ---------------------------
                                                  ---------------------------

    Weighted average number of common shares        13,649,000    13,471,000
                                                  ---------------------------
                                                  ---------------------------



    PACIFIC & WESTERN CREDIT CORP.
    Consolidated Statement of Comprehensive Income (Loss)
    (thousands of dollars)

                                                  for the three months ended
                                                  ---------------------------
                                                    January 31    January 31
                                                       2008          2007
                                                  ---------------------------
                                                   (unaudited)   (unaudited)

    Total net income                               $       536   $     1,091
    Other comprehensive income (loss),
     net of tax:
      Net unrealized gains (losses) on assets
       held as available-for-sale(1)                    (5,158)          760
      Amount transferred to net income
       for hedges(2)                                        53            53
      Amount transferred to net income for sale
       of available-for-sale assets(3)                    (123)       (1,121)
                                                  ---------------------------
      Total other comprehensive income (loss)           (5,228)         (308)
                                                  ---------------------------
    Total comprehensive income (loss)              $    (4,692)  $       783
                                                  ---------------------------

    (1) Net of income tax benefit (expense) of $1,924 (2007-($468))
    (2) Net of income tax benefit (expense) of ($30) (2007-($30))
    (3) Net of income tax benefit (expense) of $63 (2007-$379)



    PACIFIC & WESTERN CREDIT CORP.
    Consolidated Statement of Changes in Shareholders' Equity
    (thousands of dollars)

                                                  for the three months ended
                                                  ---------------------------
                                                    January 31    January 31
                                                       2008          2007
                                                  ---------------------------
                                                   (unaudited)   (unaudited)

    Common shares
    Balance, beginning of period                   $    35,743   $    33,986
    Shares issued                                            6           354
    Shares repurchased                                    (217)            -
    Amount transferred from contributed surplus              -             5
                                                  ---------------------------
    Balance, end of period                         $    35,532   $    34,345
                                                  ---------------------------

    Class A preferred shares
                                                  ---------------------------
    Balance, beginning and end of period           $     3,545   $     3,545
                                                  ---------------------------

    Contributed surplus
    Balance, beginning of period                   $       182   $       244
    Fair value of stock option
     transactions (note 3)                                 263           153
    Repurchase of shares                                  (445)            -
    Amount transferred to common shares                      -            (5)
                                                  ---------------------------
    Balance, end of period                         $         -   $       392
                                                  ---------------------------

    Retained earnings
    Balance, beginning of period                   $    24,125   $    32,875
    Transitional adjustment                                  -           103
    Net income                                             536         1,091
    Dividend in kind                                         -       (10,698)
    Dividends on preferred shares                         (240)         (240)
    Repurchase of shares                                   (17)            -
                                                  ---------------------------
    Balance, end of period                         $    24,404   $    23,131
                                                  ---------------------------

    Accumulated other comprehensive
     income (loss), net of taxes
    Balance, beginning of period                   $    (6,541)  $         -
    Transitional adjustment                                  -         3,982
    Other comprehensive income (loss)                   (5,228)         (308)
                                                  ---------------------------
    Balance, end of period                         $   (11,769)  $     3,674
                                                  ---------------------------

    Total shareholders' equity                     $    51,712   $    65,087
                                                  ---------------------------
                                                  ---------------------------



    PACIFIC & WESTERN CREDIT CORP.
    Consolidated Statement of Cash Flows
    (thousands of dollars)

                                                  for the three months ended
                                                  ---------------------------
                                                    January 31    January 31
                                                       2008          2007
                                                  ---------------------------
                                                   (unaudited)   (unaudited)

    Cash provided by (used in):

    Operations:
    Net income                                     $       536   $     1,091
    Items not involving cash:
      Provision for credit losses                            8           429
      Other provisions                                      20             -
      Stock-based compensation (note 3)                    263           153
      Future income tax recovery                          (199)         (116)
      Gain on sale of available-for-sale
       securities                                         (499)         (606)
      Gain on disposal of shares                             -          (888)
      Change in derivative financial instruments           197             -
    Change in other assets and liabilities              (2,836)       (2,629)
                                                  ---------------------------
                                                        (2,510)       (2,566)
                                                  ---------------------------

    Investing:
    Purchase of securities                            (339,970)     (262,694)
    Proceeds from sale of securities                   371,802       208,407
    Mortgages and loans                                  8,256       (31,757)
                                                  ---------------------------
                                                        40,088       (86,044)
                                                  ---------------------------

    Financing:
    Deposits                                            80,294       (36,318)
    Notes payable                                        5,000             -
    Short term financings                              (49,917)       59,750
    Proceeds of common shares issued                         6           354
    Shares repurchased                                    (679)            -
    Dividends paid                                        (240)         (240)
                                                  ---------------------------
                                                        34,464        23,546
                                                  ---------------------------

    Increase (decrease) in cash resources               72,042       (65,064)

    Cash resources, beginning of period                113,421       207,720
                                                  ---------------------------

    Cash resources, end of period                  $   185,463   $   142,656
                                                  ---------------------------
                                                  ---------------------------


    Supplementary cash flow information:
      Interest paid during the period              $    10,933   $     9,990
      Income taxes paid during the period          $        68   $       264



    PACIFIC & WESTERN CREDIT CORP.
    Notes to the interim consolidated financial statements (unaudited)
    For the three months ended January 31, 2008


    1.  Basis of presentation

        The interim consolidated financial statements of Pacific & Western
        Credit Corp. (the Corporation) should be read in conjunction with the
        Corporation's consolidated financial statements for the year ended
        October 31, 2007, which are available on SEDAR at www.sedar.com.
        These consolidated financial statements have been prepared in
        accordance with Canadian generally accepted accounting principles
        using the same accounting policies and methods as were used for the
        Corporation's financial statements for the year ended October 31,
        2007.

    2.  Allowance for credit losses

                                                  for the three months ended
                                      ---------------------------------------
                                                            January 31, 2008
                                      ---------------------------------------
                                           General     Specific        Total
        (thousands of dollars)           allowance    allowance    allowance
        ---------------------------------------------------------------------
        Balance, beginning of
         the period                    $     2,733  $       473  $     3,206
        Provision for credit losses              -            8            8
        Recoveries (write-offs)                  -            -            -
        ---------------------------------------------------------------------
        Balance, end of period         $     2,733  $       481  $     3,214
        ---------------------------------------------------------------------


                                                  for the three months ended
                                      ---------------------------------------
                                                            January 31, 2007
                                      ---------------------------------------
                                           General     Specific        Total
        (thousands of dollars)           allowance    allowance    allowance
        ---------------------------------------------------------------------
        Balance, beginning of
         the period                    $     2,208  $       358  $     2,566
        Provision for credit losses            135          294          429
        Recoveries (write-offs)                  -            -            -
        ---------------------------------------------------------------------
        Balance, end of period         $     2,343  $       652  $     2,995
        ---------------------------------------------------------------------

        Gross impaired loans at January 31, 2008 totalled $1,363,000
        (January 31, 2007 - $2,544,000).


    3.  Shareholders' equity

        a. Share capital and contributed surplus:

                                                     Employee Stock Options
                                                   --------------------------
                                                                    Weighted-
                                            Common                   average
                                            shares                  exercise
                                       outstanding       Number        price
           ------------------------------------------------------------------

           Outstanding,
            October 31, 2007            13,685,552    1,054,345  $      8.58
           Granted                               -      249,398         7.83
           Exercised                         2,000       (2,000)        3.00
           Expired                               -       (3,166)        8.31
           Repurchased                     (82,900)           -            -
           ------------------------------------------------------------------
           Outstanding, end of period   13,604,652    1,298,577  $      8.43
           ------------------------------------------------------------------


           In addition, at January 31, 2008, there were 1,142,556
           (2007-1,142,556) preferred shares outstanding.

           During the quarter ended January 31, 2008, the Corporation
           recognized $263,000 (2007-$153,000) of salaries and benefits
           expense relating to the estimated fair value of stock options
           granted. The fair value of options granted during the period was
           estimated using the Black-Scholes option pricing model based on
           the following weighted-average assumptions: (i) risk-free interest
           rate of 4.03% (2007-4.07%), (ii) expected option life of 5 years
           (2007-5 years), (iii) expected volatility of 30% (2007-30%), and
           (iv) expected forfeiture rate of 5% (2007-5%). The weighted
           average fair value of options granted was estimated at $2.66
           (2007-$3.87) per share.

           On July 17, 2007, the Corporation announced that it had filed a
           Notice of Intention to make a Normal Course Issuer Bid, pursuant
           to which the Corporation may purchase for cancellation up to
           1 million of its common shares. The bid will terminate on July 18,
           2008. The price that the Corporation pays for any common shares
           will be the market price at the time of acquisition. For the three
           months ended January 31, 2008, the Corporation had repurchased for
           cancellation 82,900 common shares for a total cost of $679,000. To
           date, the Corporation has repurchased for cancellation 163,100
           common shares for a total cost of $1,263,000.

        b. Accumulated other comprehensive income (loss):

           The balance in accumulated comprehensive income (loss) consists
           of:

                                                    January 31    January 31
                                                       2008          2007
                                                  ---------------------------
           Net unrealized losses on assets
            held as available-for-sale             $   (11,633)  $     4,027
           Deferred losses related to previously
            closed cash flow hedges                       (136)         (353)
                                                  ---------------------------
           Balance, end of period                  $   (11,769)  $     3,674
                                                  ---------------------------


    4.  Derivative instruments

        At January 31, 2008, the Corporation had outstanding contracts for
        asset liability management purposes to swap between floating and
        fixed interest rates with notional amounts totalling $96,750,000
        (2007 - $81,733,000). The Corporation only enters into these interest
        rate contracts for its own account and does not act as an
        intermediary in this market. These contracts have a current
        replacement cost of $390,000 (2007 - $nil), a credit equivalent
        amount of $1,660,000 (2007 - $1,171,000) and a risk weighted balance
        of $332,000 (2007 - $234,000). At January 31, 2008, these contracts
        were in an unfavorable position of $6,663,000 (2007 - $2,429,000).
        Under the accounting standard relating to hedges, this amount is
        included in other liabilities on the consolidated balance sheet,
        however there was nominal impact on net income.

        At January 31, 2008, the Corporation had outstanding credit
        derivative contracts for credit risk management purposes under which
        the Corporation would be compensated by the counterparty to the
        contract for losses on a security or loan in the event a default
        occurs. At January 31, 2008, the counterparties to these contracts
        which totalled $7.3 million (2007 - $32.0 million) consisted of
        Canadian chartered banks. The contracts have a nominal fair value and
        mature within two years.

    5.  Commitments and contingencies

        The amount of credit related commitments represents the maximum
        amount of additional credit that the Corporation could be obligated
        to extend. The amount with respect to the letters of credit are not
        necessarily indicative of credit risk as many of these arrangements
        are contracted for a limited period of usually less than one year and
        will expire or terminate without being drawn upon.


                          Loan commitments     $ 453,076,000
                          Letters of credit       33,732,000
                                              ---------------
                                               $ 486,808,000
                                              ---------------

    6.  Capital Management

        a. Overview:

           The Corporation's policy is to maintain a strong capital base so
           as to maintain investor, creditor and market confidence and to
           sustain future development of the business. The impact of the
           level of capital on shareholders' return is also important and the
           Corporation recognizes the need to maintain a balance between the
           higher returns that might be possible with greater leverage and
           the advantages and security afforded by a sound capital position.

           The Corporation's primary subsidiary is Pacific & Western Bank of
           Canada, (the "Bank") and as a result, the following discussion on
           capital management is with respect to the capital of the Bank. The
           Bank operates as a bank under the Bank Act (Canada) and is
           regulated by the Office of the Superintendent of Financial
           Institutions Canada (OSFI). OSFI sets and monitors capital
           requirements for the Bank.

           Capital is managed in accordance with policies and plans that are
           regularly reviewed and approved by the Board of Directors and take
           into account forecasted capital needs and markets. The goal is to
           maintain adequate regulatory capital to be considered well
           capitalized, protect consumer deposits and provide capacity for
           internally generated growth and strategic opportunities that do
           not otherwise require accessing the public capital markets, all
           while providing a satisfactory return for shareholders. The Bank's
           regulatory capital is comprised of share capital, retained
           earnings and accumulated other comprehensive income (loss) (Tier 1
           capital) and subordinated notes (Tier 2 capital).

           The Bank monitors its capital adequacy and related capital ratios
           on a daily basis and has policies setting internal maximum and
           minimum amounts for its capital ratios. These capital ratios
           consist of the assets-to capital multiple and the risk-based
           capital ratio.

           During the three month period ended January 31, 2008, there have
           been no material changes in the Bank's management of capital and
           it has complied with capital requirements as prescribed by OSFI's
           Guidelines on Capital Adequacy.

        b. Assets-to-Capital Multiple:

           The Bank's growth in total assets is limited by a permitted
           assets-to-capital multiple which is prescribed by OSFI and is
           defined as the ratio of the total assets of the Bank to its
           regulatory capital. The Bank's assets-to-capital multiple is
           calculated as follows:

                                                    January 31    January 31
           (thousands of dollars)                      2008          2007
           ------------------------------------------------------------------

           Total assets
            (on and off-balance sheet)             $ 1,522,647   $ 1,370,251
           ------------------------------------------------------------------
           Capital
             Common shares                         $    47,117   $    42,117
             Retained earnings                          25,650        22,454
             Accumulated other comprehensive
              income (loss)                             (9,137)        3,673
             Subordinated debentures                    30,000        30,000
           ------------------------------------------------------------------
           Total regulatory capital                $    93,630   $    98,244
           ------------------------------------------------------------------

           Assets-to-capital ratio                       16.26         13.95
           ------------------------------------------------------------------


        c. Risk-Based Capital Ratio:

           OSFI requires banks to measure capital adequacy in accordance with
           guidelines for determining risk-adjusted capital and risk-
           weighted assets including off-balance sheet credit instruments.
           Based on the deemed credit risk for each type of asset, a
           weighting of 0% to 150% is assigned to determine the risk-based
           capital ratio. OSFI requires banks to maintain a minimum total
           risk-based capital ratio of 10% and a Tier 1 risk-based capital
           ratio in excess of 7%.

           In June 2004, the Basel Committee on Banking Supervision released
           its report entitled "International Convergence of Capital
           Measurement and Capital Standards: A Revised Framework" (Basel
           II). The new framework is designed to more closely align
           regulatory capital requirements with underlying risks by
           introducing changes in the treatment of credit risk. An explicit
           new capital charge for operational risk was introduced, as well as
           increased supervisory review of capital adequacy and expansion of
           the related public disclosure. The new Basel II Framework was
           effective November 1, 2007 for Canadian banks. The Bank's risk-
           based capital ratios at January 31, 2008 are presented below using
           the guidelines under Basel II. The Bank's risk-based capital
           ratios at January 31, 2007 are those determined under the previous
           capital adequacy guideline.

                                  January 31                January 31
                                     2008                      2007
           ------------------------------------------------------------------
                            Notional/      Risk       Notional/      Risk
           (thousands         Drawn      Weighted       Drawn      Weighted
            of dollars)       Amount      Balance       Amount      Balance
           ------------------------------------------------------------------
           Balance sheet
            assets        $ 1,488,962  $   723,114  $ 1,344,365  $   773,420
           Off-balance
            sheet assets      583,499       56,818      234,475       23,749
           Charge for
            operational
            risk                            30,835                         -
           ------------------------------------------------------------------
           Total risk-
            weighted
            assets                     $   810,767               $   797,169
           ------------------------------------------------------------------
           Regulatory
            capital                         93,630                    98,244
           ------------------------------------------------------------------
           Total risk-
            based capital
            ratio                            11.55%                    12.32%
           ------------------------------------------------------------------
           Tier 1 risk-
            based capital
            ratio                             7.85%                     8.10%
           ------------------------------------------------------------------


    7.  Comparative figures

        Certain comparative figures have been reclassified to conform to the
        current period's presentation.
    

    Pacific & Western Bank of Canada (PWBank), a Schedule I chartered bank,
is a branchless financial institution with over $1.4 billion in assets. PWBank
specializes in providing innovative financing to large corporate and
government entities including hospitals, school boards, universities and
colleges, municipalities and provincial and federal government agencies. With
no retail operations or store fronts, PWBank is one of the most efficiently
operating financial institutions in Canada. These overhead savings translate
into very competitive rates for our clients.
    Pacific & Western Bank of Canada is wholly owned by Pacific & Western
Credit Corp., whose shares trade on the TSX under the symbol PWC.

    On behalf of the Board of Directors: David R. Taylor, President & C.E.O.

    To receive company news releases, please contact: Camille Malette at
    camillem@pwbank.com, (519) 675-4204





For further information:

For further information: Investor Relations: (800) 244-1509,
InvestorRelations@pwbank.com; Public Relations & Media: Tel Matrundola,
Vice-President, (416) 203-0882, telm@pwbank.com; Visit our website at:
http://www.pwbank.com

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Pacific & Western Credit Corp.

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